New legislation introduced by U.S. Sen. Ron Wyden (D-OR) and U.S. Rep. Richard Neal (D-MA) would prevent ultra-wealthy individuals from abusing tax-preferred retirement accounts as tax shelters.
Wyden, the ranking member of the Senate Finance Committee, and Neal, the ranking member of the House Ways and Means Committee, said the legislation would prevent the accumulation of massive fortunes inside the tax-preferred retirement accounts, like IRAs and 401(k)s by requiring ultra-wealthy individuals to take distributions from accounts with balances over $10 million, while making no changes to retirement accounts for middle-class savers.
“Tax-preferred retirement accounts are not supposed to be a loophole for the ultra-rich to shelter immense fortunes, they’re a lifeline for working Americans who may not otherwise have a dignified retirement,” Wyden said. “It’s especially outrageous to see these mega-retirement accounts building up at a time when half of American workers don’t have access to a workplace retirement plan at all. Individuals worth hundreds of millions or billions of dollars do not need any taxpayer subsidy to save, so we need to close this loophole and focus the taxpayer subsidies for retirement savings on the people who really need the help.”
The lawmakers also released reports from the Joint Committee on Taxation (JCT) about the prevalence of mega-retirement accounts. The JCT estimates that just 208 individuals held an average of $85.1 billion in tax-sheltered retirement accounts at the end of 2024, with those accounts having an average balance of $17 million. More than 32,000 individuals had similar accounts with more than $10 million.
“Our retirement savings system is built on incentives to help workers achieve financial security after a lifetime of work—not on loopholes for the wealthiest to exploit,” Neal said. “Allowing a handful of individuals to accumulate staggering fortunes while still receiving taxpayer subsidies was never what Congress intended. At a time when millions of workers still struggle to save enough for retirement, there is no justification for taxpayer-subsidized multi-million-dollar accounts. Closing these loopholes is a matter of basic tax fairness, and Congress must restore this savings vehicle to its intended purpose.”
In addition to the minimum distribution requirements, the legislation would prohibit further contributions to a Roth or traditional IRA if the total of an individual’s IRA and defined contribution retirement plan vested account balances exceeds $10 million for the prior year.